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Saturday, July 12, 2008

Bear Market Statistics

2007-2008 Bear Market Statistics through 07/11/08

We are currently in a bear market. (See numerical data below the chart.) We had similar bear markets with just over 20% declines in 1990 and 1998 but the average bear market is more like 30% because that includes the 2000 to 2002 bear market where the S&P500 fell 50% and the great depression where the markets fell much more.

=>This means the correction from intraday high to intraday low is 24.7% and we are currently 0.217518024 21.8% off the peak.

=>The decline in the NASDAQ off the closing high to the closing low was 24.1%

The good news is the charts are showing some divergence with lower prices while CMF and RSI have turned up. These indicators along with the "Investors’ Intelligence Bull Bear sentimetn survey data" and "proprietary VIX" charts I recently updated and will send to my newsletter subscribers this weekend are signaling that a bottom "may" be close at hand. These chart indicators are far from perfect at predicting the future, but they have been reliable at identifying reasonable times to take profits and later buy back shares in the past.

Note: I don't recommend trying to time the markets with anything more than a few percent of your overall portfolio. With that said, these charts can be helpful for picking great times to "rebalance" your portfolios when markets are stretched to extremes rather than wait to do it once a year. Make sure you read my article "Using Asset Allocation to make money in a Flat Market" to get an idea what I mean.

For us mere mortals who KNOW we can't read the future with a crystal ball, a well diversified basked of index funds for our core portfolios, such as the ones I recommend in "Kirk Lindstrom's Investment Newsletter" for the majority of your assets is the way to go.